I noted (here on the blog and also here) that I didn't think predictions about inflation acceleration and a recession as a result of a a second Trump presidency seemed probable. Yes, he would cut social spending, but would likely expand defense spending, and the tariffs would have a level effect on prices, but not a persistent one on the rate of change (inflation). This was before the rant by Elon Musk on spending cuts and the need for real hardship. Elon suggested cuts of 2 trillion dollars which would obviously, if they were to pass, cause a major recession (I discussed that on the Rick Smith Show). Now Elon and Ramaswamy suggest cuts of about 500 billion. Still a huge number, more than 1.5% of GDP, that would certainly provoke a recession. They say (read it in full here):
They suggest that the Pentagon doesn't know how it spends the money, which is true, but make no mistake, they are going for Medicare and Medicaid (particularly the latter; easier to take money from the poor than the elderly). I still doubt that they will cut spending significantly overall, and that there's anyone concerned with the deficits in the incoming administration. That's actually one of the few good things (although how they are going to spend, and tax, will cause a lot of pain).
On that, on the hardship, that is forthcoming, I'm reminded of this interview by Arthur Okun (yesterday a kid was presenting on his ideas in my history of thought class), on the push back on the higher taxes and sacrifice arguments within the White House early on the JFK administration. He said:
I do expect that some people will be forced to sacrifice. I'm still skeptical about the fiscal adjustment. But I have been wrong before.
PS: Note that back then, as now, extra spending for defense reasons encountered no real concern. The idea to raise taxes was a political gimmick from JFK's advisors. Not push back from Congress.
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